Why do all of you focus in on the cost of the equipment only? What about research and development? Of yeah, advertising during primtime television on all major networks is very cheap... Now I'm sure apple is probably making somewhere in the neighborhood of 35-40% profit on each phone sold, but I personally have NO problem with a company that manufactures and sells a quality product, earning a good profit margin for their product.

AT&T buys the phones at full retail price ($499 for 16GB model and $599 for 32GB) and will make money by tying you down to a 2 year contract with data fees. In essence, they will make the difference back on the phone in 6 months on your service alone, and profits exponentially with the data service.
I'm sure when AT&T and Apple were in negotiations, Apple wanted a residual from the data, and AT&T disputed this, hence paying the full price of the handset.
It would have been ideal for Apple to make a percentage of the data sales, while AT&T gave us a better price break on the handset (close to $120-$140 on the phone) however, AT&T's greed overcame the negotiations.
This is only theory, but makes logical sense.

Not surprising. Mine went through the wash 24 hours after getting it. Apple replaced it for $100.

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I once prayed to God for an iPhone, but quickly found out He didn't work that way...so I stole an iPhone and prayed for His forgiveness.

A dog is the only thing on earth that loves you more than you love yourself. - Josh Billings

$187 to make the iphone? What if apple secretly owns all the manufacturers that produce most of the parts to make the phone altogether? How many companies do you know that can sell every product they make in 24-72 hours? I bet its a 70% profit on each phone.

with contract, apple is only making $13 off a 16GB, unless they get some of the money from the contracts

Not only does AT&T pay them for every phone with contract sold, Apple get a percentage of the AT&T's take on each of the customer with iPhone service. So yeah Apple is making a lot of money off of each iPhone owners. That $13 per phone you can just put it as change going towards the cost of everything else other than the cost of the supply. $22,100,000 chunk of change and it is just from 1st day of sale (1.7 million estimated).

Anyone who says "well then they should be selling it for like $200 then without a contract" should be handed a perfectly-assembled iPhone but with not a byte of data on it. No software, no media, no kernal...nothing.

Cause that's what the device costs, right? (Apple actually pulls volunteers off the streets to write all their software for no more payment than a smile, a pat on the back, and a well-wishing from Jobs. If you didn't already know that.)

first of all, if you buy a phone with a 2 year contract, you get the phone cheaper, because u sign a 2 year contract! So if the phone costs with no contract 899$, you get it for 199$ if u sign a contract for 2 years and. If you want a contract for one year you get the device for 299$.

Just for example. In europe u have to choice at some mobile providers, to do exactly this.(just one year, but pay more)

So there`s an option to buy the phone without a contract, with no sim-lock. Then here in switzerland u have to pay about 800$ for the iPhone 3GS (I converted it for you..)

So what does the iPhone 4 Sim-Free really cost? Not 199$ or 299$.
I got the information from a local dealer, u can find it on there website(digitec online shop).

Then the hardware dealer wants also to earn some money. I think about to 25-30%. So Apple sells to device to my calculation for about 730$, sim-free. With sim locked devices there are some special contracts with the providers and apple.

The real production cost is about 250$ to 300$ with all the engineering, promotion and many things more. Then they sell it to their contract partners like AT&T for 500-600$ would be realistic in my opinion.(maybe cheaper, but apple gets some money from the contract u have with AT&T) Thats why the sim-free device is anyway much more expensive.